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Paycheck Protection Program
American Middle Class

All Business Owners Need to Know about the Paycheck Protection Program

youThe Paycheck Protection Program (PPP) will inject liquidity into small businesses with fewer than 500 employees that the coronavirus or COVID-19 affects.  PPP is part of the Coronavirus Aid, Relief, and Economic Security (CARES) that Congress passed and President Donald Trump signed into law on March 27, 2020, Act

The massive $2.2 trillion stimulus bill allocates nearly $350 billion in loans, which can be forgivable if the businesses maintain 75 percent of their workers for eight weeks, to cover payroll, rents, mortgages, and other business operational expenses.  Expectedly, the program is super popular.  Small businesses’ revenues plummeted as much as 90 percent after the government ordered nearly 97 percent of Americans to stay home and practice social distancing.

All small business owners impacted by COVID-19 should take advantage of this excellent loan program.  Running a small business is already a full-time commitment. Here’s what business owners need to know before spending valuable time submitting a loan application.

Paycheck Protection Program’s Eligibility

  • Active & Operational on or before February 15,2020
  • Have 500 Employees or Fewer
  • Physical Business Location Must Be in the United States
  • No gambling Established

Paycheck Protection Program’s Required Documents

All Applicants

  • Business start date
  • Bank account and routing number

Sole Proprietors and Self Employed

  • 2019 IRS Form 1099-MISC for any independent contractors paid, not to exceed $100,000 for the year
  • 2019 IRS Form 1040-C if your business is a sole proprietorship

Applicants with employees and nonprofit organizations

  • 2019 IRS Form 941 for quarterly salary, wages, commissions, and tips
  • 2019 IRS Form 944 same as 941, but annualized
  • 2019 IRS Form W-3
  • 2019 IRS Form 940 for any unemployment costs
  • 2019 IRS Form 1099-MISC for any independent contractors paid, not to exceed $100,000 for the year
  • 2019 IRS Form 1040-C if your business is a sole proprietorship
  • monthly costs for salary, wages, commissions, or tips (not exceeding $100,000 annually for each employee)

Paycheck Protection Program’s Loan minimum/Maximum

  • Minimum: Any amount
  • Maximum: $10 million
  • A business owner can get approved for 250% of average monthly payroll expenses

Where to Apply for Paycheck Protection Program’s

  • Through Existing SBA Lenders Starting April 3, 2020
  • Through Existing SBA Lenders Starting April 10, 2020, for Independent Contractors and Self-employed Individuals
  • Through any Federally Insured Depository Institution, Federally Insured Credit Union, and Farm Credit System Institution

What Can I Use Paycheck Protection Program for?

  • Payroll costs, including benefits;
  • Interest on mortgage obligations, incurred before February 15, 2020;
  • Rent, under lease agreements in force before February 15, 2020; and
  • Utilities, for which service began before February 15, 2020.

How Can I Request a Paycheck Protection Program Loan Forgiveness?

Businesses can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on an eligible mortgage, lease, and utility obligations.

Businesses must certify that the documents are accurate and that they used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must decide on forgiveness within 60 days.

Business owners should avoid reducing full-time employees and decreasing wages before they request and approve for loan forgiveness from their servicer.  The government, through its servicer, will reduce the amount of the loan that gets forgiven if you fired full-time employees and decreased wages.

How long Will Paycheck Protection Program Last?

The Paycheck Protection Program will be open until June 30, 2020.  You can take out only one loan under this program.  The program might extend past June 30, 2020, but business owners should apply for this program as long as possible.

Paycheck Protection Program’s Loan Terms

  • 00% fixed rate.
  • Due In 2 years.
  • No collateral is required
  • No personal guarantee requirement
  • All payments are deferred for 6 months
  • Possibly forgivable
  • No SBA guarantee fee?

Options for Employers with 500 Employees or Higher

The Federal Reserve announced yesterday that it would create a Main Street Lending facility, which will allow them to buy 95% of the loans from lenders that underwrite loans to businesses with up to 10,000 employees and $2.5 billion in revenues.

The special-purpose vehicle will allow federally insured depository institutions, credit unions, and Farm Credit System Institution to issue loans to medium-size businesses without taking much risk Since the Fed will take the loan off their books.

If COVID-19 disrupts your business operations and you have more than 500 employees, you need to reach out to your existing bank and inquire about this product.  The terms might not be as favorable as the Paycheck Protection Program’s loan, but the loan should be cheaper since the Fed is bearing much of the risk.

The US government is utilizing both its fiscal and monetary policies in concert to prevent the economy from going into a great recession.  Businesses, with viable operations before COVID-19, have to explore the Paycheck Protection Program and other government-supported programs.

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